US Trustee moves to appoint examiner in Celsius bankruptcy case

Quick Take

  • The United States Trustee filed a motion to appoint an examiner to provide more transparency in Celsius’ Chapter 11 case.
  • The office has complained that the firm has failed to provide sufficient information on its business practices and balance sheet.  
  • The Trustee also wants more clarity on the allegation that the firm offered unregistered securities.

The United States Trustee wants to appoint an examiner to embattled lender Celsius to produce an unbiased public report providing transparency on the firm's business operations, investments, transactions, and customer accounts.

Shara Cornell, the representative for the Office of the Trustee, teased the move in this week's second-day hearing when she opposed Celsius's motion to access its mined bitcoin. She argued Celsius had repeatedly failed to submit sufficient information to her office, including specifics about costs related to the still-in-progress mining expansion. For that reason, she said during the hearing, her office was considering appointing an examiner for clarity on this and other issues.

Now, a new motion filed by the office is asking the US Bankruptcy Court for the Southern District of New York to enter an order to appoint that examiner.

Celsius filed for Chapter 11 bankruptcy protection last month after significant market volatility led to liquidity issues forcing the firm to halt withdrawals and enter bankruptcy proceedings. The filing acknowledges its cooperation in the Chapter 11 process but argues significant "financial irregularities" have taken place in the novel bankruptcy case requiring a third party to investigate. This should be a group outside of the creditor committee that speaks for the interests of the creditors and customers, said the Office of the Trustee. 

"Irrespective of such cooperation, however, the divergent interests of the various estates, the extreme financial irregularities that have taken place, and the extensive mistrust of the Debtors’ customers, all make the appointment of an independent and disinterested examiner in the best interests of creditors, equity security holders, and the bankruptcy estates," said the motion.

The filing cites allegations from regulators that Celsius offered unregistered securities and failed to obtain proper licenses and hedge against market volatility.

"If these allegations are true, they could expose further irregularities. An examiner would be able to look into these and other issues to determine if there are any claims or causes of actions that the Unsecured Creditors Committee (the “Committee”) can pursue," the filing said. 

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